To Win Big, It Helps to Be a Little “Nuts”

Here’s a simple question for all you students of business success and stock-market returns: What has been the best-performing stock in the United States since the “Black Monday” crash of 1987? If you said Apple or Microsoft or Walmart or Berkshire Hathaway, you’d get credit for a reasonable answer. But you’d be wrong. The best-performing stock in the United States over the last 25 years is a company that most of you, I’d be willing to guess, have never heard of — a company called Fastenal, based in the quiet town of Winona, Minnesota (population: 28,000), located on the banks of the Mississippi River 30 miles northwest of La Crosse, Wisconsin.

In what glamorous, high-margin, cutting-edge business has Fastenal made its mark? Not software, healthcare, or aerospace. Fastenal is the country’s dominant distributor of nuts and bolts. That’s right…If you’ve got the proverbial screw loose, if you’re a major construction company or a small contractor or individual homeowner desperate for an exotic nut or bolt to complete a job, Fastenal is where you turn.

According to a recent article in Bloomberg BusinessWeek, the company has more than 11,000 sales people in 2,600 stores along with an online catalogue that extends for 10,700 pages. It also has more than 5,500 “fully customized and automated Fastenal stores” on job sites and at customer locations — essentially, vending machines for nuts and bolts. The result of this overwhelming reach is truly overwhelming business performance. According to BusinessWeek, the company’s share price is up 38,565 percent since October 1987. Microsoft, by contrast, is up less than 10,000 percent over that same period (still not bad!), and Apple is up by 5,500 percent.

What’s the lesson to draw from Fastenal’s growth and prosperity? I suppose you could wax rhapsodic about the virtues of low-tech components in a high-tech age, and remind yourself that not every growth company is based in Silicon Valley or some other Internet hotspot. But the real lesson is more universal than that. The Fastenal story reminds all of us of the power of making big bets and staking out an “extreme” position in the market — in this case, offering a wider variety of products through more channels at a greater number of physical and virtual locations than anyone else in the business.

Fastenal has thrived because it has carved out a truly one-of-a-kind presence in its field. As its founder, Bob Kierlin, told BusinessWeek, “It was the craziest thing to ask people to invest in a company selling nuts and bolts” — especially one that aspired to sell anything to anyone virtually anywhere. But as it turns out, if you want to win big, it helps to be a little, ahem, nuts.

That’s a lesson I’ve learned over and over as I’ve studied hugely successful companies in brutally tough industries. It’s just not good anymore to be “pretty good” at everything. The most successful companies figure out how to become the most of something in their field — the most elegant, the most simple, the most exclusive, the most affordable, the most seamless global, the most intensely local. For decades, so many organizations and their leaders got comfortable with strategies and practices that kept them in the “middle of the road” — that’s, in theory, where the customers were, that’s what felt safe and secure. But today, with so much change, so much pressure, so many new ways to do just about everything, the middle of the road has become the road to nowhere.

Just to be clear, being the “most of something” doesn’t have to mean being the biggest or most dominant player in your field. It means being the most deeply committed to a one-of-a-kind strategy and a distinctive presence in a world in which most companies and their leaders are content with doing business more or less like everyone else. As Jim Hightower, the colorful Texas populist, is fond of saying, “There’s nothing in the middle of the road but yellow stripes and dead armadillos.” To which we might add companies and their leaders struggling to stand out from the crowd, even as they play by the same old rules in a crowded marketplace.

One of my favorite bankers in the world, Vernon Hill, who created the one-of-a-kind Commerce Back several decades ago (which he sold to Canada’s TD Bank for a cool $8.5 billion), and is now creating the truly unique Metro Bank in London (the first new bank launched in London in 138 years), has a simple reason for why he strives to become the most of something among banks — in his case, not the biggest, but the most colorful, the most entertaining, the most intensely focused on service and convenience. “Every great company,” he likes to say, “has redefined the business that it’s in. Even though I was trained as a banker, I don’t think like a banker. I do things that conventional bankers think are nutty.”

What goes for nutty bankers goes for retailers selling nuts and bolts. If you want to win big, you have to stand for something special — whether that’s the widest selection and most comprehensive reach, or the most focused offerings and most memorable service. There are countless ways to design the kind of unique profile and strategic presence that Fastenal has in its business and Vernon Hill has in his business. All it requires is a commitment to originality, a willingness to challenge convention and break from standard operating procedure, that remains all-too-rare in business today, precisely because it can look a little “nutty” to the powers-that-be.

If you do business the same way everyone else in your field does business, why would you expect to do any better? So ask yourself: What are you the most of in your business — and how do you become even more of that?